P&C Insurance Accounting for MGAs and Wholesalers

P&C insurance accounting is fundamentally different from standard bookkeeping.

For MGAs and wholesalers, premium does not behave like a normal invoice. Money flows between insureds, producers, carriers, premium finance companies, and trust accounts. Policies change mid term. Commissions move independently of cash. Bordereaux reporting depends on accounting accuracy, not just policy data.

This guide explains how P&C insurance accounting actually works, why it breaks at scale, and how modern MGA and wholesale organizations should think about accounting as part of the insurance lifecycle.

What Makes P&C Insurance Accounting Different

Most accounting systems assume a simple model. Invoice is issued. Payment is received. Revenue is recognized. P&C insurance does not work that way.

MGAs and wholesalers deal with:

• Agency bill and direct bill business at the same time
• Installments and premium finance arrangements
• Endorsements, cancellations, and return premium
• Commission splits and fees
• Trust and fiduciary requirements
• Carrier settlement and bordereaux reporting

Accounting must reflect policy activity, not just cash movement. When systems fail to do this, teams fall back on spreadsheets.

Why MGA and Wholesale Accounting Breaks at Scale

Accounting problems usually appear gradually. At first, spreadsheets help close gaps. Over time, they become the system of record.

Common breaking points include:

• Partial payments that do not match invoices
• Installments posted manually each month
• Commissions reconciled outside the ledger
• Trust balances tracked separately from accounting software
• Month end close that depends on one or two people

These are not process issues. They are structural issues caused by tools that were never designed for insurance premium flows.

How P&C Insurance Accounting Actually Works

Modern P&C insurance accounting follows a clear operational flow. Each step builds on the previous one.

GAAP Accounting Integration

Insurance accounting starts with mapping policy, billing, and commission activity to GAAP compliant accounting rules.

This ensures that revenue recognition, deferred balances, and earned premium are aligned with accounting standards, not manual adjustments.

Insurance Specific Chart of Accounts Setup

A generic chart of accounts cannot support insurance operations.

Insurance requires dedicated accounts for:

• Written premium
• Earned and unearned premium
• Commissions payable and receivable
• Fees and taxes
• Trust and clearing balances

A standardized insurance specific chart of accounts allows consistent reporting across programs, carriers, and entities.

Journal Entry Automation

Every policy action creates accounting impact. Binds, endorsements, cancellations, and earned premium movements should automatically generate journal entries. When this does not happen, accounting teams recreate transactions manually after the fact. Automation reduces errors and preserves a complete audit trail.

Policy and Producer Receivables and Payables

This is where most accounting systems fail.

Insurance accounting must track:

• Amounts due from insureds
• Amounts owed to producers
• Carrier settlements
• Partial and out of order payments

Receivables and payables must stay tied to policies, not just invoices, to support reconciliation and trust accounting.

Carrier Bordereaux Generation

Bordereaux reporting is an output of accounting accuracy. When accounting is correct, carrier ready bordereaux can be generated by program, period, and line of business. When accounting is wrong, bordereaux become a manual reporting exercise.

Agency Bill vs Direct Bill Accounting

Agency bill and direct bill accounting behave very differently. Agency bill requires tracking gross premium, commissions, fees, and trust balances. Direct bill requires tracking commissions independently of cash flow.

Understanding this distinction is critical. Many accounting issues originate from treating both models the same.

Learn more in: Agency Bill vs Direct Bill Accounting Explained

Why Spreadsheets Still Run Insurance Accounting

Spreadsheets exist because systems fall short.

They are used to:

• Allocate partial payments
• Track installments
• Reconcile commissions
• Prepare bordereaux
• Close the month

Spreadsheets are flexible, but they are not auditable, scalable, or safe. Modern insurance accounting replaces spreadsheet logic with rules driven workflows.

Related reading: Why Spreadsheets Still Run Insurance Accounting

How Accounting Connects to Policy Issuance and Bordereaux

Accounting should not be an afterthought.

It connects directly to:

• Policy issuance
• Endorsements and cancellations
• Carrier reporting
• Delegated authority compliance
• Audit readiness

When accounting is integrated into the insurance lifecycle, downstream processes improve automatically.

Who This Guide Is For

This guide is written for:

• MGA controllers and CFOs
• Wholesale accounting teams
• Program administrators
• Operations leaders responsible for close and compliance

If you are evaluating P&C insurance accounting software or rethinking how accounting fits into your insurance operations, this guide provides the foundation.

Explore how modern systems approach this problem: Premium Accounting Overview

Introducing a Modern Approach to Insurance Accounting

Accounting systems built for insurance do not replace policy systems. They work alongside them.

Modern premium accounting integrates with existing agency management systems, rating platforms, and general ledgers, providing insurance specific accounting without forcing a rip and replace. This approach is now being adopted by MGAs and wholesalers using platforms from Selectsys to manage premium complexity at scale.

Key Takeaways

• P&C insurance accounting is fundamentally different from standard accounting
• MGA and wholesale accounting breaks due to structural limitations
• Accounting must follow policy activity, not just cash
• Agency bill and direct bill require different treatment
• Bordereaux quality depends on accounting accuracy
• Spreadsheets are a symptom, not a solution

What to Read Next

• What Is P&C Insurance Accounting
• Why MGA and Wholesale Insurance Accounting Breaks at Scale
• Bordereaux Reporting Starts With Good Insurance Accounting
• Agency Bill vs Direct Bill Accounting Explained
• Why Spreadsheets Still Run Insurance Accounting
• Installments and Premium Finance Accounting
• Direct Bill Commission Reconciliation
• Bordereaux Reporting Starts With Good Insurance Accounting
• Audit, Trust, and Compliance in P&C Insurance Accounting
• Introducing Selectsys Premium Accounting for MGAs and Wholesalers

FAQs

What is P&C insurance accounting?
P&C insurance accounting is the process of tracking premiums, commissions, receivables, payables, and settlements based on policy activity rather than simple invoicing.

Why is insurance accounting more complex than normal accounting?
Insurance accounting must handle policy changes, endorsements, cancellations, partial payments, trust requirements, and detailed carrier reporting that standard accounting systems are not designed to manage.

What is agency bill vs. direct bill accounting?
Agency bill means the MGA collects premium from the insured and remits it to carriers. Direct bill means the carrier collects the premium directly and pays commission to the MGA.

Why do MGAs use spreadsheets for accounting?
MGAs often rely on spreadsheets to fill gaps where traditional accounting systems cannot support insurance-specific workflows and policy-level tracking.